Domestic airlines will have to pay ₹115/litre for ATF if they opt for price stabilisation fund: Official

The effective selling price of aviation turbine fuel (ATF) for India’s airlines would be ₹115 per litre should they opt for the price stabilisation fund announced by the Union Cabinet on Wednesday, Rohit Raj, Director at the Union Ministry of Civil Aviation told reporters Thursday at the bi-weekly inter-ministerial briefing on the situation in West Asia.

This would be frozen for a period of three years, the stipulated contract period, regardless of the prevailing market price of ATF – or until the differential financial support is recovered.

After accounting for taxation (that is, VAT and Central Excise duties) and airport-related charges, the effective price comes to 115 per litre for India’s airlines – both domestic and international operations – though the benchmark price is ₹86.32/litre.

Although the benchmark price of ATF for international operations is ₹104.49. Further, it is not subject to VAT and Central Excise duties, only airport-related charges.

“We are fixing the price at FOB level where there is no incidence of VAT and Central Excise. Then you will have to apply them to come to the price under the scheme,” he stated.

Effectively, the latest proposed arrangement would replace the erstwhile capping with a fixed selling price.

The Union Cabinet had announced a ₹10,000 crore self-sustaining price stabilisation fund to shield airlines in the backdrop of escalating jet fuel prices because of the conflict in West Asia.

Whilst announcing the cabinet decision on ATF Thursday, the government had stated that international ATF prices surged from ₹60.5/litre in March to ₹142/litre in May this year.

Mr. Raj also clarified that airlines would have the option to enter into an agreement for purchasing fuel from one oil-marketing company or all combined.

“It is a commercial arrangement. Ministry of Civil Aviation will not interfere,” he stated, adding the overall scheme is also optional.

At present, jet fuel is sold at ₹104.93 per litre in Delhi. This was after OMCs hiked prices by 9% on April 1.

The Union Petroleum Ministry had informed then that OMCs only passed a quarter of the actual impact if ATF prices were aligned with international prices.